The lead story at the Wall Street Journal describes how Uber, with its top ranks decimated and the company now run by an unwieldy 14 member committee, is begging employees to stay. From the Journal:
In the days after Travis Kalanick stunned Uber Technologies Inc.’s more than 15,000 employees by resigning as chief executive, the company’s senior leaders made impassioned pleas reassuring them it is worth sticking around….
Months of unflattering headlines and an investigation into allegations of sexual harassment and sexism at Uber have taken a toll. In interviews, some employees expressed sadness over the company’s now-tainted reputation, while others said they were upset with management for allowing its dirty laundry to be aired. Some said they were hopeful Uber could restore its reputation after adopting nearly 50 changes to improve its culture that resulted from an internal investigation into workplace conduct by former U.S. Attorney General Eric Holder’s law firm…
Some employees said the uncertainty has made it hard to work, especially as they have watched co-workers pack up their desks. Others said they are considering leaving, fearful that Uber could face a struggle to raise new funds. On the other hand, some worry about missing on out a big payday if they leave before their stock options fully vest, which takes four years, or before a reinvention of the company culture.
“People are leaving because they feel like it’s on fire,” said Nora Hamada, a recruiter with Mirus Search, who said she has helped a handful of Uber employees find work at other startups.
The Wall Street Journal pointed out that waiting for stock options to vest could lead some workers to stay on, but that Uber made them less juicy as its valuation skyrocketed. From a New York Times story earlier this month:
Since at least 2015, Uber has offered employees different versions of the share buyback program. In general, employees who have worked at the company four years and have been granted stock options meaning the ability to buy a certain number of shares from the company at a low price — may sell part of those options back to Uber at a locked-in price. Uber pays the employee for those options over several months.
The idea behind the program is that employees can turn some of their paper wealth into cash while still working at Uber. If they quit before the entire amount is paid, the payments stop.
Such a buyback targets early employees because participants must have worked at Uber four years or more. About two years ago, when Uber had fewer than 2,000 full-time employees, it stopped issuing stock options in compensation packages and instead issued restricted stock units, which the company is not permitted to repurchase. Uber now has about 14,000 employees.
As Lambert demonstrated this week in Links, none of the initial stories on Kalanick’s ouster as CEO questioned Uber’s business model or lack of a credible path to profits. That’s starting to change. From a Financial Times story, Can Uber ever make money?:
…the challenge now will be to shift Uber’s model from one that has been very successful at revenue growth, to one that is more financially sustainable and, eventually, profitable.
Some economists say there was no obvious way to do that…
“There is no clear pathway I can see for Uber to go from a high-revenue growth company to a profitable company,” says Aswath Damodaran, a professor of finance at the Stern School of Business. “Normally the story for start-ups is that as revenues grow economies of scale will kick in, but that story is tough to tell with Uber.”….
Uber has between $6.5bn and $7bn of unrestricted cash in the bank, with a further $2.3bn untapped line of credit. This could cover the company’s cash needs for roughly three more years, extrapolating from its losses during the first quarter of this year….
The fact that switching costs are so low between one service and the other — both drivers and riders can easily flip between the apps — means that it can be hard for Uber to defend its market dominance.
In comments, reader Nick Name pointed out:
It is just an app, nothing more. Amazon have built a formidable distribution machine, Google’s IP is unassailable, even Netflix is now creating some unique content, but Uber could be replicated by a proficient teenager.
Even beyond that the fundamental flaw in their model is that there is no inherent penalty in a driver working for multiple networks nor for the customer using multiple networks. In fact it makes economic sense for the drivers to do this as they can play the networks against each other. In the world where uber owns a fleet of autonomous vehicles first mover advantage would have been huge and unassailable. This is decades away however and I doubt uber will still be around then (not to mention the fact that the motor giants are probably perfectly capable of running their own fleets).
The Journal described in some detail how Liane Hornsey, chief of human resources, and Frances Frei, senior vice president of leadership and strategy, both of whom recently joined the company, are shaking up performance reviews and other policies. For instance:
Rather than numerically ranking employees against one another based on performance and potential career trajectory, and linking the ranking directly with pay, Uber is encouraging managers to help their teams set three or four business goals and broader “citizenship” goals for the company, employees said. Other changes include training in diversity and adopting a version of the “Rooney Rule,” which requires hiring managers to interview diverse candidates for all open positions….
Who gets paid and who gets promoted send the strongest signals to employees as to what a company really cares about. But it’s way too early to tell how these new programs will relate to pay. Moreover, younger workers famously want very specific feedback and individual assessment. A lot of workers may be less than keen about team-based approaches, not just because it’s by design a big departure from what management hopes will be the old Uber, but also because it seems to go against the grain of the preferences of self-perceived tech stars. Plus with so many top slots open, particularly that of the CEO, who knows how many of these new initiatives will turn out to be provisional or wind up being treated as corporate eyewash.
And on top of that, there’s a rearguard action underway:
Some employees are standing by Mr. Kalanick. More than 1,000 signed an internal petition demanding that the board reinstall him. “Employees, we need to revolt this!” read the petition, reviewed by the Journal.
Some employees also have friends and colleagues urging them to quit:
“There’s a lot of peer pressure to quit Uber to work at a more ethical company,” Ms. Hamada said. Female employees she has spoken with in particular feel pressured by friends and peers at other tech firms to leave, she said.
And this Mercury News story Friday, Uber sanctioned for refusing to comply with Moraga sexual battery investigation, judge calls company’s record “horrific”, sure won’t help:
Uber was sanctioned Friday for its failure to comply with a search warrant for records on a driver suspected of sexually battering a female passenger for more than 10 minutes, with a judge calling its reputation for dealing with law enforcement “horrific.”…
Before imposing a $1,000 sanction, which takes effect Monday if Uber hasn’t submitted the records by then, Judge Clare Maier blasted the ride hailing company for its history of failing to cooperate with law enforcement, and said she was “very concerned” the company had an “ulterior motive” for its noncompliance in the Beker case.
$1,000? No wonder the company is thumbing its nose at the judge. But now is one of the few times that a story like this can do actual harm to the local ride company.
So Uber drama will continue to keep reporters busy. Couldn’t happen to a more deserving bunch.